Property/casualty insurers see $1.7B underwriting loss

Private U.S. property/casualty insurers posted a $1.7 billion net underwriting loss in the first nine months of 2016, according to an analysis released Thursday.

That contrasts sharply with a $7.3 billion net underwriting gain during the same period a year earlier, Verisk Analytics Inc.’s Insurance Services Office Inc. and the Property Casualty Insurers Association of America said in their report.

P/C insurers also saw a drop in net income after taxes to $31.8 billion from $44.1 billion in the prior-year period.

The combined ratio deteriorated to 99.5% in the first nine months of 2016 from 96.9% a year earlier, and net written premium growth slowed to 2.8% in the period from 4.1% a year earlier.

Net investment income dropped to $33.0 billion in nine-months 2016 from $34.9 billion a year earlier, ISO said, and realized capital gains decreased to $5.6 billion from $8.8 billion, resulting in $38.6 billion in net investment gains for nine-months 2016, down $5.1 billion from a year earlier.

Direct insured property losses from catastrophes striking the United States totaled $17.4 billion in nine-months 2016, up from $13.1 billion a year earlier and above the $15.9 billion average nine-months direct catastrophe losses for the past 10 years.

Despite the rough numbers, Beth Fitzgerald, Jersey City, New Jersey-based president of ISO Solutions, said in a statement that “there are some promising signs in the industry.”

“Policyholders’ surplus continued to grow and reached a record high of $688.3 billion,” Ms. Fitzgerald said in the statement. “The Federal Reserve raised interest rates in December 2016 and is expected to increase rates further in 2017. Still, it will take time for insurers’ investment yields to improve. To succeed in today’s market, insurers need to be focused on their underwriting. Those that incorporate robust data and analytics will be equipped to make the best possible decisions about the risks they insure.”

In the third quarter of 2016, ISO said, insurers` net income after taxes fell to $10.1 billion from $13.1 billion a year ago, and their combined ratio worsened to 99% in third-quarter 2016 from 95.7% a year earlier.

Annualized rate of return on average surplus dropped to 5.9% in the third quarter from 7.8% a year earlier. Net written premiums rose $3.1 billion, or 2.3%, to $139.2 billion in third-quarter 2016 from $136.1 billion a year earlier.